Severance – Frequently Asked Questions

May 15, 2019
By
Riggan Law Firm

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Q: Am I legally entitled to a severance package?

A: Typically, an employer is not legally required to provide an employee with a severance package. An exception to this would be if an employee had signed an employment agreement that contractually required the employer to provide certain severance pay and/or benefits. Even though an employer is not legally required to provide severance pay, many employers do, either as part of a specific policy or practice, or in individual instances because of particular circumstances and/or when certain risks are present (see more below).

Q: If my employer is not legally required to provide me with severance pay, then why would the employer be willing to pay me severance?

A: It could be that the employer has a regular policy or practice of providing severance pay and/or benefits. This is more typical with medium to large-size companies who terminate an employee and then offer a “standard” severance package. This offer usually consists of a designated number or weeks/months of severance pay. Sometimes, the employer’s offer of severance is “negotiable” and sometimes it is not (see more below).

An employee’s individual circumstances can also engender an opportunity to negotiate a severance package. For example, an employee could have legal or practical leverage that would encourage their employer to pay (or consider paying) severance. By consulting with an employment attorney, you can learn about your rights and whether you have leverage to negotiate a severance package.

Remember that in the context of a severance, the tradeoff is that the employee is getting certain financial compensation (such as severance pay, extended health insurance coverage, etc.), and the employer receives the employee’s release of all potential legal claims. In addition, the employer often receives other favorable terms, such as the employee’s promise to keep the terms confidential, the employee’s promise not to make disparaging remarks about the employer, the employee’s acknowledgment that it will not reapply or be rehired by the employer, the employee’s promise not to engage in certain post-employment activities (see more below), etc. These employee promises are all valuable to the employer, and many employers are willing to pay the employee financial compensation in return for the security of these promises.

Sometimes, the tension between an employee and an employer is such that each is unhappy with the other, but for whatever reason, neither is willing to “call it quits.” In other words, the employee is not willing to resign, and the employer is not willing to fire the employee. In this situation, an employment lawyer can sometimes intervene and negotiate a severance arrangement that is acceptable to both the employee and the employer. As a result, the employee can leave an undesirable job and the employer is able to “get rid of” (and not have to fire) the employee.

Q: I am miserable at my job. Can I still get a severance package if I quit?

A: Most likely not. Quitting a job not only prevents you from getting severance, but also, extinguishes any legal claims and/or other practical leverage you may have. Before an employee quits their job, they should consider consulting with an employment lawyer to understand his or her legal rights. Sometimes, an employment lawyer may be able to identify leverage or pressure points (whether legal or otherwise) for negotiating a severance package. If the employee just quits their job without consulting with counsel, the employee would be walking away “empty handed” without knowing whether a severance package was a possibility.

In short, quitting an undesirable job may relieve you of stress in the short run, but it also eliminates your opportunity to negotiate a severance package. Consulting an employment lawyer and knowing your rights is the best way to make a fully-informed decision.

Q: My employer has offered me a severance package. Should I have it reviewed by a lawyer, or should I just sign the agreement and take what the employer is offering?

A: It is always a good idea to have your severance reviewed by an employment attorney who has the appropriate level of skill and knowledge for this area of the law. A severance agreement is a legally-binding contract. Before signing the document, you need to evaluate it with your “eyes open” and with a full understanding of your legal rights. In many instances, the actions you take in response to employer’s severance proposal is not simply a decision of whether to sign it or reject it. Oftentimes, there is a middle ground position of negotiating with your employer in an effort to obtain more favorable terms (which can sometimes lead to a higher amount of severance pay). Remember, the employer’s severance proposal is just that – a proposal. The terms of the employer’s proposal only become set in stone if the employee signs the agreement without negotiating. The advice of an employment lawyer can be valuable to an employee who is having to make a decision in response to an employer’s severance proposal.

Most of the time, a severance proposal by an employer is accompanied by a short response deadline, usually 21 days or less. If an employee is going to consult with counsel, it is wise to do so immediately after receipt of the severance proposal. This gives your attorney sufficient time to review the agreement and go over your options (and leverage) for responding.

Q: If I get fired and I am offered a severance package, do I have to sign the agreement that same day?

A: Usually not, and it is probably a bad idea to do so. Typically, an employer’s severance proposal has a specific response deadline. If the employer does not make that deadline clear during your termination, you need to ask after it. If the employer gives you a deadline, however short it may be, resist the temptation to sign the agreement right away. It can be very emotionally difficult to process the news that your employment is being terminated. Employees often need time to regroup, reflect, and consider their options. Consulting with an employment lawyer can—and should—be part of that process, and, in fact, most severance agreements specifically state, in writing, that you have the right to consult with legal counsel (this language is legally required for employees who are 40 years of age or older and are being asked to release age discrimination claims under federal law). If you have a deadline that is a few days or weeks ago, but you sign the employer’s severance agreement the day you are terminated, you are doing yourself a disservice.

Q: If I signed a non-compete agreement or some other restriction on my future employment, how is that affected by a severance agreement?

A. Employees often sign agreements at the beginning of—or during—their employment that may restrict their activities if they leave their job.

The most common types of such restrictions are:

A promise not to work for a competitor for a period of time (usually 1-2 years)

A promise not to solicit or do business with the company’s clients/customers

A promise not to solicit or try to hire the company’s employees for a period of time

A promise not to use or disclose the company’s confidential business information

Whether a court will enforce these types of post-employment restrictions varies on a case-by-case basis and is very fact-specific (and also heavily dependent on which state’s law applies). In some states, the enforceability of a non-compete agreement can be impacted by the manner in which an employee is separated from the company. For example, if an employee is terminated by the employer “without cause,” some states’ laws may call into question the enforceability of a non-compete provision.

Post-employment restrictions are often the subject of severance negotiations. It is recommended that an employee consult with an employment lawyer to understand their rights before signing a severance agreement, engaging in negotiations, or even making any “assumptions” about how the law may apply to their particular situation. If it is important for the employer to get you to agree to (or reaffirm) these types of restrictions as part of a severance agreement, the employer may be willing to pay you some money (or more money than their initial offer) to entice you to sign the agreement. Advice from an employment lawyer can help to make sure that you are making a fully-informed decision and getting the best possible result.

Rely on 30+ Years of Collective Legal Experience

Contact the Missouri employment law attorneys at Riggan Law Firm if you have questions about severance packages or your legal rights. Our knowledgeable legal team can review the proposed severance amount and determine if you have enough leverage to negotiate for a higher offer. We have a comprehensive understanding about the laws and regulations surrounding this multifaceted legal field and can help you achieve the results you deserve.

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